In the U.S., the status of “not for profit” and hence tax-exempt is given to any number of organizations, including churches and charities, but also including hospitals, schools, societies for promoting the arts (such as many community theatre groups), boy scouts and girl scouts, community service organizations, and a host of others.
The terminology is a bit odd, because these organizations are not forbidden from making profit. A condition for granting not-for-profit status is that they cannot be organized specifically for making profit; and (speaking very broadly) any profits that they do make must be invested back in the organization*.
Notice that the employees or volunteers who work for the organization ARE taxed. The pastor of a church must report any income received from the church (or from any other source), and is taxed on that.
What makes a not-for-profit organization different from a for-profit organization, is that the organization itself is not taxed. Thus, the organization has more profit (or potential for profit) since it needn’t pay taxes. The government thus assigns not-for-profit status for causes that it views as “worthy.”
(*There are some exceptions, profit can be invested in another not-for-profit organization – so a hospital can donate some of its profit to a nursing school, for instance. Note that not all of an organization’s activity needs to be directed at the charitable or socially-worthy functions. A food kitchen may need to buy new equipment, say a computer for record keeping. Or may want to buy the building next door for ultimate expansion of services. The requirement is that the profit must be used or invested for things that help promote the organization’s purposes.)
AskNott:
Of course, the new venture can file for not-for-profit status on its own right. This is a protection, so that you don’t set up a for-profit business owned by a not-for-profit foundation as a tax-avoidance scam.